Once Seen As ‘Too Risky,’ Emerging Market ETFs Rake In Assets

January 4th at 6:00am by Tom Lydon

110_F_625514_pMfHE7nFrbhNLwkifmEca2UFdNcE6i Once shunned by many investors as being “too risky,” emerging market equity funds – including exchange traded funds (ETFs) – were the belles of the ball in 2009 as they raked in a record amount of assets.

Emerging equity fund inflows surged to $80.3bn in 2009, according to research group EPFR Global. That’s the mostt since the company began tracking such data in 1997. Emerging markets have suddenly experienced a sharp reversal of sentiment, and with it, fortune.

David Oakley for The Financial Times reports that this year’s inflows totaled to $25.9 billion,  more than the previous record set in 2007 and contrasted with the $86 billion of outflows suffered by developed world equity funds in 2009. [Emerging markets was a stand-out sector in 2009.]

The so-called BRIC economies (Brazil, Russia, China and India) attracted the most assets, with the bulk of investor interest focused upon them. Overall, as industrialized economies are expected to grow at much lower levels than their emerging market peers, investors expect greater returns from developing world stocks. Thus far, risk aversion seems to be the main obstacle for emerging markets right now. [Frontier markets also offer rewards.]

For more stories about emerging markets, visit our emerging markets category.

  • Vanguard Emerging Markets ETF (NYSEArca: VWO): up 73.4% year-to-date

  • iShares MSCI Emerging Markets Index (NYSEArca: EEM): up 68.2% year-to-date

For full disclosure, Tom Lydon’s clients own shares of VWO and EEM.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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